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Question;eek Five Exercise Assignment;Financial Ratios;1. Liquidity ratios. Edison, Stagg, and Thornton have the following financial information at the close of business on July 10;Edison Stagg Thornton;Cash $6,000 $5,000 $4,000;Short-term investments 3,000 2,500 2,000;Accounts receivable 2,000 2,500 3,000;Inventory 1,000 2,500 4,000;Prepaid expenses 800 800 800;Accounts payable 200 200 200;Notes payable: short-term 3,100 3,100 3,100;Accrued payables 300 300 300;Long-term liabilities 3,800 3,800 3,800;a. Compute the current and quick ratios for each of the three companies. (Round calculations to two decimal places.) Which firm is the most liquid? Why?;2. Computation and evaluation of activity ratios. The following data relate to Alaska Products, Inc;20X5 20X4;Net credit sales $832,000 $760,000;Cost of goods sold 530,000 400,000;Cash, Dec. 31 125,000 110,000;Average Accounts receivable 205,000 156,000;Average Inventory 70,000 50,000;Accounts payable, Dec. 31 115,000 108,000;Instructions;a. Compute the accounts receivable and inventory turnover ratios for 20X5. Alaska rounds all calculations to two decimal places.;3. Profitability ratios, trading on the equity. Digital Relay has both preferred and common stock outstanding. The com?pany reported the following information for 20X7;Net sales $1,750,000;Interest expense 120,000;Income tax expense 80,000;Preferred dividends 25,000;Net income 130,000;Average assets 1,200,000;Average common stockholders' equity 500,000;a. Compute the profit margin on sales ratio, the return on equity and the return on assets, rounding calculations to two decimal places.;b. Does the firm have positive or negative financial leverage? Briefly ex?plain.;4. Horizontal analysis. Mary Lynn Corporation has been operating for several years. Selected data from the 20X1 and 20X2 financial statements follow.;20X2 20X1;Current Assets $86,000 $80,000;Property, Plant, and Equipment (net) 99,000 90,000;Intangibles 25,000 50,000;Current Liabilities 40,800 48,000;Long-Term Liabilities 153,000 160,000;Stockholders? Equity 16,200 12,000;Net Sales 500,000 500,000;Cost of Goods Sold 322,500 350,000;Operating Expenses 93,500 85,000;a. Prepare a horizontal analysis for 20X1 and 20X2. Briefly comment on the results of your work.;5.Vertical analysis. Mary Lynn Corporation has been operating for several years. Selected data from the 20X1 and 20X2 financial statements follow.;20X2 20X1;Current Assets $86,000 $80,000;Property, Plant, and Equipment (net) 99,000 80,000;Intangibles 25,000 50,000;Current Liabilities 40,800 48,000;Long-Term Liabilities 153,000 150,000;Stockholders? Equity 16,200 12,000;Net Sales 500,000 500,000;Cost of Goods Sold 322,500 350,000;Operating Expenses 93,500 85,000;a. Prepare a vertical analysis for 20X1 and 20X2. Briefly comment on the results of your work.;6. Ratio computation. The financial statements of the Lone Pine Company follow.;LONE PINE COMPANY;Comparative Balance Sheets;December 31, 20X2 and 20X1 ($000 Omitted);20X2 20X1;Assets;Current Assets;Cash and Short-Term Investments $400 $600;Accounts Receivable (net) 3,000 2,400;Inventories 3,000 2,300;Total Current Assets $6,400 $5,300;Property, Plant, and Equipment;Land $1,700 $500;Buildings and Equipment (net) 1,500 1,000;Total Property, Plant, and Equipment $3,200 $1,500;Total Assets $9,600 $6,800;Liabilities and Stockholders? Equity;Current Liabilities;Accounts Payable $2,800 $1,700;Notes Payable 1,100 1,900;Total Current Liabilities $3,900 $3,600;Long-Term Liabilities;Bonds Payable 4,100 2,100;Total Liabilities $8,000 $5,700;Stockholders? Equity;Common Stock $200 $200;Retained Earnings 1,400 900;Total Stockholders? Equity $1,600 $1,100;Total Liabilities and Stockholders? Equity $9,600 $6,800;LONE PINE COMPANY;Statement of Income and Retained Earnings;For the Year Ending December 31,20X2 ($000 Omitted);Net Sales* $36,000;Less: Cost of Goods Sold $20,000;Selling Expense 6,000;Administrative Expense 4,000;Interest Expense 400;Income Tax Expense 2,000 32,400;Net Income $3,600;Retained Earnings, Jan. 1 900;Ending Retained Earnings $4,500;Cash Dividends Declared and Paid 3,100;Retained Earnings, Dec. 31 $1,400;*All sales are on account.;Instructions;Compute the following items for Lone Pine Company for 20X2, rounding all calcu?lations to two decimal places when necessary;a. Quick ratio;b. Current ratio;c. Inventory-turnover ratio;d. Accounts-receivable-turnover ratio;e. Return-on-assets ratio;f. Net-profit-margin ratio;g. Return-on-common-stockholders? equity;h. Debt-to-total assets;i. Number of times that interest is earnedFinal paperWrite a five-to seven-page financial statement analysis of a public company, formatted according to APA style as outlined in the Ashford Writing Center. In this analysis you will discuss the financial health of this company with the ultimate goal of making a recommendation to other investors. Your paper should consist of the following sections: introduction, company overview, horizontal analysis, ratio analysis, final recommendation, and conclusions. Your paper needs to include a minimum of two scholarly resources in addition to the textbook as references.Here is a breakdown of the sections within the body of the assignment:Company OverviewProvide a brief overview of your company (one to two paragraphs at most). What industry is it in? What are its main products or services? Who are its competitors?Horizontal Analysis of Income Statement and Balance SheetPrepare a three-year horizontal analysis of the income statement and balance sheet of your selected company. Discuss the importance and meaning of horizontal analysis. Discuss both the positive and negative trends presented in your company.Ratio AnalysisCalculate the current ratio, quick ratio, cash to current liabilities ratio, over a two-year period. Discuss and interpret the ratios that you calculated. Discuss potential liquidity issues based on your calculations of the current and quick ratios. Are there any factors that could be erroneously influencing the results of the ratios? Discuss liquidity issues of competitive companies within the same industry.RecommendationBased on your analysis would you recommend an individual invest in this company? What strengths do you see? What risks do you see? It is perfectly acceptable to state that you would recommend avoiding this company as long as you provide support for your position.Writing the Final Paper1. Must be five to seven double-spaced pages in length, and formatted according to APA style as outlined in the Ashford Writing Center.2. Must include a title page with the following:a. Title of paperb. Student?s namec. Course name and numberd. Instructor?s namee. Date submitted3. Must begin with an introductory paragraph that has a succinct thesis statement.4. Must address the topic of the paper with critical thought.5. Must end with a conclusion that reaffirms your thesis.6. Must document all sources in APA style, as outlined in the Ashford Writing Center.7. Must include a separate reference page, formatted according to APA style as outlined in the Ashford Writing Center.

Paper#39368 | Written in 18-Jul-2015

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